If you think entrepreneurship is for younger generations and that 50 is too old to start a business, think again. In fact, according to the U.S. Small Business Administration (SBA), people over 50 are one of the fastest growing groups launching businesses, and they’re quite successful when they do.
The “encore” entrepreneurs, as they’re sometimes referred to, have a lot going for them that make them excellent candidates to run businesses. They typically have access to more funds, have more connections and, most importantly, have more experience than their younger counterparts. Research shows these things pay off.
For example, the Harvard Business Review found that contrary to the popular belief that youth is necessary to launch a successful business, most successful entrepreneurs are middle-aged.
They stated, “If you were faced with two entrepreneurs and knew nothing about them besides their age, you would do better, on average, betting on the older one.” A study by Wharton came to the same conclusion, finding that a 50-year-old entrepreneur is 1.8 times more likely to achieve upper-tail growth than a 30-year-old entrepreneur.
Should you start a business in retirement?
While that’s good news for the older set, it’s not to say that starting a business is right for everyone in the years approaching retirement age. There are risks and rewards that must be weighed and evaluated based on each person’s unique situation, including their tolerance for risk. Here are a few of the primary ones to consider:
Of course, with any business, there’s a chance it won’t succeed and that you could lose money. No matter how great the concept and how well you execute your business plan, there’s always the potential for unexpected costs, lower-than-expected sales and other obstacles (hello, worldwide coronavirus pandemic!) that can affect your bottom line.
If you have deep pockets, then you may be able to handle a potential loss, but if you don’t, the risk becomes greater. Losing a large sum of money at age 50 is filled with different challenges than it is at age 30 when you have more years standing between you and retirement.
Starting and running a business requires that you pour your heart and soul into it. You and your family must be prepared for how such a move can affect your lives and the changes owning a business may cause. It often means sacrificing your time and putting off other activities like family trips. And if it doesn’t succeed, it can be devastating.
In many cases, the rewards outweigh the potential risks of starting your own business, including the following:
Help cover rising health expenses
As you age, experts report that health expenses take up a larger piece of the pie. If profitable, your new business may help offset those rising costs if you apply for coverage through your state marketplace, considering you likely won’t qualify for group coverage as a sole proprietor.
If your new venture takes a bit of time before you start seeing revenue, rest assured that you may be able to stay on your state’s Medicaid program after the age of 65.
Ramp up your retirement
Although you shouldn’t ever risk your retirement savings to fund a business, you can use the proceeds from a successful business to contribute to your nest egg. The extra income is a great way to help reach your retirement dreams or dream bigger than you had initially planned.
Leave a legacy for your family
Whether it’s a business that can be passed on to your children and grandchildren or one that can eventually be sold to help fund their education or other endeavors, owning a successful business allows many people to fulfill the desire to make the future brighter for their loved ones.
You can’t put a price tag on some of the most significant benefits building your own business can bring. It’s things like being your own boss, following your passion and building something from the ground up that make any risks worth it for many.
3 things to do if you decide to go for it
To minimize the risks and reap the rewards, there are some things everyone should do before launching a business, no matter their age, including the following three primary steps:
While you may think your idea is unique, you need to dig deep into the space you plan to enter. What’s your market, who are your competitors and how will you be able to fill a void? What will set you apart?
Another key factor to determine is how much it will cost to launch your business. The price to launch a business varies widely depending on the type of business, but it may not take as much as you think. In fact, 21% of people launch their business with $5,000 or less.
Write a business plan
A business plan is your roadmap. It outlines your company’s goals and objectives and can be used for presentations to any potential partners and investors. It should include market research, revenue projections, your value proposition and more.
If you need help, the SBA offers tools and templates to help entrepreneurs write business plans.
Once you determine how much you need to start your business, you’ll need to secure the necessary funds to do so. If you have savings or other resources to pay for the start-up costs, great, but there are also multiple kinds of small business loans available to help, as well.
They include short- and long-term loans, business lines of credit, equipment financing and more. But take note, in order to qualify, many require different levels of revenue or years in business. For example, a line of credit looks at how long your business has been profitable before granting you the additional funds.
One place you don’t want to look when it comes to funding your business is your retirement savings. While losing other funds can sting, losing retirement savings can be devastating to your future. Fortunately, there are plenty of other options to explore to find funding for your business.
Launching your own business at any age requires a lot of work, but it can also be one of the most rewarding endeavors of your life. Whether it’s the right step for you depends on a number of factors unique to you, but your age alone shouldn’t rule it out.
Maxime Rieman is Product Manager at ValuePenguin. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining ValuePenguin, a consumer research and advice company based in New York. Previously, she was product marketing director at CoverWallet and launched the personal insurance team at NerdWallet.
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